WINDERMERE, Fla. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading near or under $10 a share don't experience massive spikes higher. Traders savvy enough to follow the low-priced names and trade them with discipline and sound risk management are banking ridiculous coin on a regular basis.
Just take a look at some of the hot movers in the under-$10 complex today, including
NF Energy Saving
, soaring an amazing 138%;
China Recycling Energy
, spiking over 60%;
( ALTH), jumping over 25%; and
, rising over 20%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
I'm not as eager to recommend investing long-term in stocks that trade less than $10 a share because these names can be very speculative, and the odds for picking the long-term winners aren't great. But I definitely love to
stocks that are priced below $10. I like to view them as a trading vehicle with lots of volatility and lots of upside when the trade is timed right.
When I trade under-$10 names, I do it almost entirely based off of the charts and technical analysis. I also like to find under-$10 names with a catalyst, but that's secondary to the chart and volume patterns.
With that in mind, here 's a look at
One under-$10 name that's starting to set up for a
, a biopharmaceutical company focused on the discovery, development and commercialization of antibiotics for life threatening infections. This stock is off to a weak start in 2012, with shares off by around 25%.
If you take a look at the chart for Trius Therapeutics, you'll notice that this stock has been downtrending since last December, from a high of $8 to a recent low of $4.71 a share. During that downtrend, this stock consistently made lower highs and lower lows, which is bearish price action. That said, now the stock has started to make higher lows for the last month, and it's moving within range of triggering a near-term breakout.
Market players should now look for long-biased trades in TSRX if this stock can manage to break out above some near-term overhead resistance at $5.42 a share with high-volume. Look for volume on that move that hits near or well above its three-month average volume of 270,649 shares. If TSRX can sustain a move and close over $5.42 a share, then it will also mean the stock has pushed back above a significant downtrend line that starts at around $5.85 a share. This could signal that a significant trend change is underway for TSRX from bearish to bullish.
If we can get a close with high-volume over $5.42, then this stock could easily be setting up to a make a run move back towards its 200-day moving average of $6.48 a share or possibly higher into the mid-7s. I would probably use some near-term support at $5 as a good reference point for a mental stop. If $5.42 is taken out, then watch for the stock to move above some more near-term resistant at $5.74 to $5.86 to increase the probability of that move to $6.48 or higher.
Another under-$10 stock that's just starting to flirt with a major breakout trade today is
, an in-vitro diagnostic company. This stock is off to a monster start in 2012, with shares up over 236%.
If you take a look at the chart for TearLab, you'll see that this stock has been uptrending beautifully for the past six months, with shares running from 77 cents to today's high of $4.04. During that uptrend, this stock has consistently made higher lows and higher highs which is bullish technical price action. That move has now pushed TEAR within range of trigging a near-term breakout trade.
Market players should now look for long-biased trades in TEAR if this stock can manage to break out above some near-term overhead resistance at $3.89 a share with high-volume. Look for volume on that move that registers near or well above its three-month average action of 200,322 shares. At last check, volume on Thursday has already hit over 363,000 shares and the stock has hit a daily high of $4.04.
Watch for any sustained
and close above $3.89 and near its daily high to signal that TEAR wants to trend much higher. Keep in mind that this potential breakout in TEAR could be a significant one since the next major overheard resistance won't come into play until around $5.14 a share. The closest near-term support level is at $3.35 a share, which could be used as your stop. That said, I would rather be long off of strength with TEAR maintaining its trend over $3.89 with strong upside volume flows.
CAS Medical Systems
An under-$10 name in the medical equipment and supplies complex that's starting to look interesting is
CAS Medical Systems
, a medical technology company that develops, manufactures and markets non-invasive patient monitoring products. This stock is off to a decent start in 2012, with shares up over 13%.
If you take a look at the chart for CAS Medical Systems, you'll notice that this stock bottomed in late 2011 at around $1.50 a share, and then ran up to its 2012 high of $2.98 a share. Since hitting that high, the stock has pulled back to its current price of around $2 a share. Now the stock has started to flirt with its 50-day of $2.10 and its 200-day of $2.18 moving averages today, and it's moved within range of some near-term overhead resistance levels. This move today could be signaling that CASM is preparing for a large spike higher.
Traders should look for long-biased trades in CASM if the stock can manage to break out above some near-term overhead resistance levels at $2.24 to $2.35 a share with high-volume. Look for volume on a move over that level that's near or above its three-month average volume of 10,587 shares. A sustained high-volume move and close above those levels should set this stock up for a run back towards its recent high of $2.98 a share or possibly higher.
At last check today, CASM has hit a high of $2.34 but it has pulled back to around $2 a share. This means that the breakout so far has failed, but it's still worth watching CASM in case it makes another run at breaking out. If we get another run soon, and CASM can sustain a high-volume move and close over $2.24 to $2.35 a share, then look for the bulls to take over and push this towards significantly higher.
An under-$10 stock in the biotechnology and drugs complex that's quickly approaching a big breakout trade is
, a clinical-stage bio-pharmaceutical company focused on discovering, developing and commercializing small molecule therapeutics for the treatment of acute (hospital-based) and chronic GI motility disorders. This stock is off to a solid start in 2012, with shares up over 25%.
On Wednesday, an analyst at JMP Securities started coverage of this stock with an outperform rating and a price target of $8 per share. Analyst Liisa Bayko said the failure of Tranzyme's most advanced drug candidate, ulimorelin, was disappointing, but the company has an even more promising drug candidate with TZP-120, a proposed treatment for diabetic gastroparesis
If you take a look at the chart for Tranzyme, you'll notice that this stock gapped down huge a few weeks ago from over $5 a share to a recent low of $1.68 a share on monster volume. Since gapping down, the stock has started to rebound sharply towards its current price of around $3.66 a share. That move has pushed TZYM back above its 200-day moving average and within range of its 50-day moving average. The stock has also just started to break out above some near-term overhead resistance at $3.30 a share.
Traders should now look for long-biased trades in TZYM if this stock can manage to break back above its 50-day moving average of $3.97 a share with high-volume. Look for volume on that move that registers near or well above its three-month average action of 205,741 shares. A sustained high-volume move and close above that level should set this stock up to fill that entire gap back towards $5 a share or possibly higher.
Keep in mind that TZYM has already started to fill some of that gap once it moved back above $3.30. That's why a high-volume move and close over its 50-day could really get this stock juiced to fill the rest of that major gap down. At this point, I would use $3.30 as a reference point for a mental stop if you buy off weakness. If you buy off strength, I would want to see this stock maintaining a trend over its 50-day with strong upside volume flows.
Northern Dynasty Minerals
One more under-$10 name that could be gearing up for a breakout trade is
Northern Dynasty Minerals
, a mineral exploration company, which holds indirect interests in 627 square miles of mineral claims in southwest Alaska. This stock has pretty much done nothing so far in 2012, with shares virtually flat.
If you take a look at the chart for Northern Dynasty Mineral, you'll notice that this stock has been downtrending since its February high of $8.19 towards its current price of around $6 a share. During that move lower, this stock has consistently made lower highs and lower lows, which is bearish technical price action. That said, the stock recently stopped its downtrend and started to trade sideways between $5.70 and $6.20 a share. A move outside of that sideways range should and above $6.20 will now trigger a breakout trade for NAK.
Traders should now look for long-biased trades in NAK if it can manage to take out some near-term overhead resistance at $6.20 a share high-volume volume. Look for volume on that move that registers near or well above its three-month average action of 181,419 shares. At last check, volume on Thursday was around 52,000 shares and the stock has hit a daily high so far of $6.14, but since pulled back to around $6 a share. A sustained high-volume move and close over $6.20 should set this stock up for a run towards its 50-day moving average of $6.73 a share or possibly much higher into the mid-7s.
If you buy NAK off weakness, then use the low end of the recent trading range at $5.70 a share as a reference point for a mental stop. That said, the probability for a large move higher will increase notably if we can get a high-volume move and close over $6.20 a share. Buying off of strength might be the better play since the stock is so close to coming out of its recent downtrend.
To see more hot under-$10 stocks, check out the
portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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At the time of publication, author had no positions in stocks mentioned.Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.